Results
Q4 of 2015/16
Financial Year 2015/16
Media and Analyst Conference
Zurich, 9 June 2016

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

HAH3

2

1. Global Market Leader in Current and Voltage Transducers
Market Position

Performance

Perspectives

LEHN

SMI

Source: Swissquote Global market shareof 50+% in Industry
 Benchmark in service
and product quality
 4 production sites in
Europe and Asia
 Sales of CHF 261.5
million in 2015/16

 Market capitalizationof CHF 1 billion
 Dividend yield >4% ineach year since 2009
 Continued sales
growth and strong
margins Reinforced investment in innovation
 Solid growth perspectives due to underlying trends
 Strong foothold in
China
 EBIT margin target of
15 to 20%3

1. LEM Applications:
Point machine
In the earliest times, simple levers operated
railway points manually. Gradually the points
came to be operated by centralized levers instations (4) and point machines.

A PCM 10-P

4

3

3

2

1

Point machines (2) have an electric motor
and gears to convert the rotating motion of
the motor into the linear motion required toswitch the points. The machine performs
following functions: moving switch blades (1),locking the blades, detection and proving theposition of blades.

A

1 Switch blade
2 Point machine
3 Trackside control cabinet
4 Control room / station

The current of the electric motor of the point
machine is measured and monitored by atransducer (PCM 10-P) (A). Any variationfrom the normal current waveform indicatesan early warning of equipment failure that will4
require preventive maintenance.

1. LEM Applications:Hybrid-electric vehicles / electric vehicles
1 High voltage battery
2 Charger

A DHAB V2

3 Motor controller
D CAB500

4 Electric motor and transaxle

D

5 DC/DC converter

C HSN

1
A

B

2

D

3
A

C

4
A

C
5

B HAH3

Battery management
The battery management system (BMS)
adjusts the charging process through the
combustion engine in a hybrid-electric vehicle
or gives the information for external charging
of the high-voltage battery (1) in an electricvehicle. CAB (D), DHAB (A) provide allnecessary current information at highaccuracy level to the BMS to improve theefficiency of the charging process.
Motor control
The motor control (3) takes power from thebatteries and delivers it to the electric motor(4). The accelerator pedal gives the signals.
HAH3 (B), HSN (C) are integrated in the
inverter modules (5) and provide current
signals at very high speed in order to assure
a smooth and jerk-free acceleration. 5

1. LEM Applications:
Magnetic Resonance Imaging (MRI)A ITL 900-T

2
1
6

7
A

MRI scanners use strong magnetic fields,
radio waves, and field gradients to form
images of the body. The specific magnetic
field is generated by 3 gradient amplifiers(x,y,z) (4) that enhance the current to supply
the gradient coils (1). The coils create aprecise magnetic field that will need to varydepending on the location.

2
4
3

8

5

1 Gradient coils

5 Shim control

2 Magnet & shim

6 Radio frequency coil

3 Generator

7 Radio frequency amplifier

4 Gradient amplifier

8 CPU & display

One LEM ITL 900 transducer (A) is used ineach gradient amplifier to measure very
accurately the electrical current flowing
through the gradient coils, which generate themagnetic field. The accuracy of the current
measurement directly influences the qualityof the image.

6

1. LEM Applications:
MV/LV substation
High voltage (HV) is adapted twice along its
way to consumers in order to simplify its
transmission and also in order to supply
applications with the right levels of voltage.

A ART
A

The last adaptation is realized inside a MV/LV
substation adapting the voltage from medium
voltage (MV) to low voltage (LV).

5
3
4

2

1
1 Medium voltage (MV) side

4 Low voltage panel

2 Medium voltage switchgear

5 Smart meter3 Transformer

6 Low voltage (LV) side

6

Within the MV/LV substation, the incoming
power flow from the MV side (1) is managed
by the MV switchgear (2) before being
converted by the transformer (3) into LV (6).
The smart meter (5) installed in the LV panel(4) measures the transformer's (3) health withthree independent ART (A) current sensors. Its
design allows safe commissioning of the smart
meter on an operating transformer.
71. Diverse Target Markets – Diversified Businesses
Businesses

Share of sales
Cyclicality
2015/16

Green Cars
Conventional Cars

18%

Macro drivers

Consumer durables Technology adoption (electrification)
Fuel savings

High precision
Late cycle

Infrastructure investments

Mid cycle

Energy prices, subsidies

Early cycle

Industrial investment

Traction
Renewable energies& power supplies
82%

Drives & welding

Automotive segment
Industry segment

8

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

5. Proposals Shareholders Meeting

Andreas Hürlimann

LF20109

2. Highlights : Stable Performance
In CHF millions, %2015/162015/16 vs.
2014/15

Q4 2015/16 vs.
Q4 2014/15

Orders

256.5

+2.2%

+2.8%

Sales

261.5

+1.4%

+1.9%

EBIT

52.9

-2.4%

+19.0%Net profit

43.5

+0.8%

+20.2%■■■■■

Maintained strong margins and net profit despite challenging market andcurrency conditions
Continuing growth in China across all businesses
Strong growth in the green cars and renewable energies businesses
managed with high delivery performance
Systematic implementation of strategy with focus on innovation,
efficiency, flexibility
10
New organization in full effect since January 2016

2. Product Launches 2015/16 (1/2)
LF 2010
 Proprietary ASIC for closed loop Hall Effect technology
 High performance, matching fluxgate performance High immunity against surrounding perturbations
Industry For drives, renewable energies and traction applications
HOY / HOYA
 High precision measurement from 600 A to 1200 A
 Very compact casing Proprietary ASIC
 For customer specific drives applications

IndustryART Rogovski coil for 1000 V isolation
 Houses very thin coil and allows flexible mounting
 High precision measurement in entire coil
 Flagship product for smart grid applications

Industry11

2. Product Launches 2015/16 (2/2)
ATO family
 Split core transducer with 600 V isolation
 Can be retrofitted
 For energy meters in power distribution andsmart grid applications

Industry

HSN Integrated busbar
 Measures currents of up to 1000 A
 Reduced sensor size allows compact system design
 For electric and hybrid-electric vehicles

Automotive

HAM High frequency transducer
 Compact design
 High temperature stability
 For inverters in fuel cell cars

Automotive
12

2. Net Sales
In CHF millions

In CHF millions, %

Sales

300

YoY
as
reported275

Q4 vs.
Q4
at constantcurrencies

250

Industry

215.2

-2.7%

+0.3%

-1.6%

225

Automotive

46.3+26.1%+23.6% +20.2%

200

Total sales

261.5

+1.4%

+3.6%

+1.9%

175

■

150
125

■

100

■

Stable Industry business and strong growthin Automotive businesses
Continued sales growth in China
Negative currency impact on sales

75
50
25
0
11/12

12/13*

13/14

14/15

15/16
13

* Restatement following IAS 19R application (pensions)2. Quarterly View
In CHF millions

Book-to-bill ratio
1.2

80

70
1.0
60
0.8
50

0.6

40

30
0.4
20
0.2
10

0.0

0
Q1
Q2
Q3
Q4
14/15
14/15
14/15
14/15
Orders received (left-hand scale)Book-to-Bill ratio (right-hand scale)

Q1
15/16

Q2
Q3
Q4
15/16
15/16
15/16
Sales (left-hand scale) Market uncertainties andshrinking inventories atcustomers translating
into shorter term
bookings
 Currency impact on sales
and bookings
 Seasonality due toincreasing share ofbusiness in China andincreasing share of
renewable energies
businesses Book-to-bill ratio stable ataround 1 for the pastquarters14

2. Industry Segment: Regional Markets
In CHF millions, %Sales

GrowthYoY

Growth Q4
vs. Q4

Europe

87.8

-7.2%

-1.7%

N. America

24.2

-2.6%

-10.2%

Asia and
ROW

103.1

+1.6%

+1.2%

Total

215.2

-2.7%

-1.6%

EuropeNorth America
Asia and ROW
41%

48%

11%

 Stable sales development in constantcurrencies (+0.3%)
 China the single most important country
representing 31% of sales
 Won market share in China
 Repeated success with recently
launched product families; ramp-up of
production15

2. Industry Segment: Business Development
In CHF millions

Op. EBIT in % of sales

240

Businesses and Applications

25

200
20

160
15
120
10
80

5
40

0

0
11/12

12/13*

13/14

14/15

* Restatement following IAS 19R application (pensions)

15/16

Drives & welding (growth YoY: -6%)
 Robust business in China
 Other regions soft due to weak industrial activity
 Overcapacities exert pressure on prices
Renewable energies & power supplies (+5%)
 Increased market share Continued investments solar farms and windparks in China and the US
 High investment in battery technology in Korea
 Pick-up in smart-grid projects
Traction (-8%)
 High activity in China and India
 Fewer new traction projects in Europe
High-precision (+8%)
 Stable medical applications
 Robust demand in test & measurement
 HVDC at high level162. Automotive Segment: Regional Markets
In CHF millions, %Sales

GrowthYoY

Growth Q4
vs. Q4

Europe3.6+22.2%+5.3%

N. America

20.4+14.2%+3.6%

Asia andROW

22.4+40.1%+42.4%

Total

46.3

+26.1%+20.2%

EuropeNorth America
Asia and ROW

48%

8%

 Strongest performance in China
44%(sales growth +55%), the US (+14%),
Japan (+13%), and Germany (+33%)
 Managed growth with high delivery
performance Won awards from customers for ontime delivery and product quality17

2. Automotive Segment: Business Development
In CHF millions

Op. EBIT in % of sales

Businesses and Applications

25

50
45

20

40
35

15

30
25

10

20
15

5

10

Conventional cars (YoY: +11%) Growth in line with market; stable market
share High demand due to strong growth of US andChinese car markets
 Won new projects and platforms to support
future growth
Green cars (HEV, EV) (+90%)
 Won market share New projects with Chinese car manufacturers
and solid growth in the US
 Increasing interest in 48 V applications for mild
hybrid-electric vehicles

5
0

0
11/12

12/13*

13/14

14/15

15/16
18

* Restatement following IAS 19R application (pensions)2. Business Development China
Sales

Production

■

■

■

Market share of over 50%
Most important market with 31% of
total sales■

LEM China stabilizes its #1 position aslargest manufacturing site of the Group(64% of total production, compared to
58% in financial year 2014/15)“Made by LEM” quality

In CHF millions

In CHF millions

180

90
80

160

70

140

60

120

50

100

40

80

30

60

20

40

10

20
0

0
11/12

12/13

13/14

14/15

15/16

11/12

12/13

13/14

14/15

15/16
19

2. Business Development Sofia (Bulgaria)
Production

14 production lines relocated fromJapan and Switzerland to Bulgaria(+6 in 2015/16)
Headcount at 171 FTEIntroduced a local development
team to support productionIn CHF millions
25

Objectives of the siteDiversify LEM’s cost-competitive
production
Increase production capacity close toEuropean customers
Increase natural hedge of operations
Absorb major part of LEM’s future
growth

+130%

20
15
10
5
0
13/14

14/15

15/16
20

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

HLSR
21

3. Financial Highlights
 Robust profitability
 Gross margin of 46.0%
 EBIT margin of 20.2%
 CHF 3.2 million negative impact on EBIT due to foreign exchange Net profit CHF 43.5 million
 Operating expenses at long term average in second half year
 Free cash flow of CHF 39.0 million
 Strong balance sheet with equity ratio of 61.3%22

3. Balance Sheet Analysis
In CHF millions

31.3.2015

31.3.2016

Net working capital

37.9

42.3

Fixed assets

39.9

39.4

Noncurrent liabilities

-6.8

-9.4

Net operating assets

71.0

72.3

Net cash / (debt)

20.9

13.6

Equity

91.9

85.9

65.0%

61.3%

Days of sales outstanding

66

69

Days of inventory outstanding

72

72

Days of payables outstanding

28

45

Equity ratio23

3. Income Statement
In CHF millions

2014/15

2015/16

ChangeQ4
2014/15Q4
2015/16

Change

Sales

257.8

261.5

+1.4%

61.5

62.7

+1.9%

Gross margin

45.9%

46.0%

+0.1pt

44.8%

45.5%

+0.8ptOperating expense

-64.2

-67.5

+5.1%

-17.2

-16.3

-5.4%

EBIT

54.2

52.9

-2.4%

10.3

12.3

+19.0%Net financial exp.

-2.7

0.7

+127.7%0.5

1.6 +185.0%

Income tax

-8.4

-10.2

+20.9%-0.9-1.8 +106.7%

Net profit

43.1

43.5

+0.8%

10.0

12.0

+20.2%

24

3. Results by Quarter
In CHF millions

In % of sales

24.1%

80

25%

23.5%
22.1%

70

20.8%

20.5%
19.6%

60

16.8%

17.1%

19.1%

18.0%
50

16.5%

17.4%
16.2%

16.2%

20%

15%

15.6%
14.4%

40

 Margin improvements in2015/16 after weak Q1
 CHF 3.2 million
negative foreignexchange impact on
EBIT for financial year
2015/16

10%

30

20
5%
10

0%

0
Q1
14/15

Q2
14/15

Q3
14/15

Q4
14/15

Orders received (left-hand scale)
Op. ROS (right-hand scale)* Restatement following IAS 19R application (pensions)

Q1
15/16

Q2
15/16

Q3
15/16

Q4
15/16

Sales (left-hand scale)
Net Profit in % of sales (right-hand scale)25

3. Gross Margin
In CHF millions

In % of sales
48%

140

47%
120

Gross margin

2014/15

2015/16

Q4
2014/15Q4
2015/16

118.4

120.4

27.5

28.6

45.9%

46.0%

44.8%

45.5%

in CHF millions
46%

100

45%

Gross margin
in % of sales

44%

80

43%
60

42%
41%

40

40%
20
39%
0

 Negative impact on gross margin due toadverse foreign exchange development
and price pressure Positive impacts on gross margin due torelocation to cost-competitive
manufacturing sites, optimized sourcing
and lower commodity prices

38%
11/12

12/13*

13/14

14/15

15/16
26

* Restatement following IAS 19R application (pensions)3. SG&A
In CHF millions

In % of sales

60

25%

SG&A

50
20%

in CHF millions

SG&A

40

in % of sales

2014/15

2015/16

Q4
2014/15Q4
2015/16

48.8

52.9

13.0

12.6

19.0%

20.2%

21.1%

20.0%

15%
30
10%
20

5%
10

0

0%
11/12

12/13*

13/14

14/15

* Restatement following IAS 19R application (pensions)

15/16

 Higher sales and administration expense
due to recruitment in Beijing and Sofia
 One-off cost in H1 of 2015/16 due to Organizational changes
 Introduction of new ERP release Build-up of European logistics anddistribution platform Sales and administration expense back tolong term average in H2 of 2015/16 27

3. R&D Expense
In CHF millions

In % of sales
7%

15

6%
12

R&D
expense2014/15

2015/16

Q4
2014/15Q4
2015/16

15.3

14.6

4.3

3.7

6.0%

5.6%

6.9%

5.9%

in CHF millions
5%

R&D
expensein % of sales

9

4%

3%

6

2%
3
1%

0%

0
11/12

12/13*

13/14

14/15

15/16

 Continued investment in R&D for bothsegments
 Ongoing renewal of product range withfocus on optimized cost, higher
accuracy, easier integration into
customers’ systems and new functions
 Develop new technologies to tap newmarkets
28* Restatement following IAS 19R application (pensions)3. EBITIn CHF millions

In % of sales

60

25%

EBIT
50
20%

in CHF millions

EBIT

40

in % of sales

2014/15

2015/16

Q4
2014/15Q4
2015/16

54.2

52.9

10.3

12.3

21.0%

20.2%

16.8%

19.6%

15%
30
10%
20

5%
10

0

0%
11/12

12/13*

13/14

14/15

 Operational profitability maintained Adverse foreign exchange impact; easing in
the course of 2015/16
 One-time operating expenses in H1 of
2015/16
 Continued cost control and productivity
improvements

15/16
29

* Restatement following IAS 19R application (pensions)3. Financial Expense
In CHF millions

Q4
2014/15Q4
2015/16

+1.0

+0.6

+1.6

-0.1

-0.2

-0.0

-0.0

-2.7

+0.7

+0.5

+1.6

2014/15

2015/16

Exchange effect*-2.6

Other financial expense &incomeTotal
Exchange effect in financial year 2015/16 mainly driven by appreciation of
the EUR vs. CHF

Foreign exchange hedging policy (unchanged)*



EUR: 100% of net exposure 12 months forward

USD: 100% of net exposure 12 months forward

The line “exchange effect” in the financial result is mainly due to currency volatility during the time between booking andsettling a receivable/payable. Over and above this line, foreign exchange rates impact every P&L line through the rate at
which each transaction is booked and at which it is consolidated into CHF.

30

3. Income Taxes
2014/15
Expected income tax rate
Expected withholding tax rate
Expected tax rate
Permanent differences
Effect of changes in tax rates on deferred tax
Adjustment in respect of previous period’s income tax
Other differences
Effective tax rate

17.6%
0.8%
18.4%
0.5%
-2.4%
-0.4%
0.2%
16.3%

2015/16
17.8%
1.6%
19.3%
0.3%
0.1%
-1.0%
0.2%
18.9%

 Unusually low tax rate in 2014/15 due to one-off reversal of withholding
tax provision after application of CN-CH double taxation agreement313. Net Profit
In CHF millions

In % of sales
20%

50

Net profit
in CHF millions

45

18%

Net profit
in % of sales

40

2014/15

2015/16

Q4
2014/15Q4
2015/16

43.1

43.5

10.0

12.0

16.7%

16.6%

16.2%

19.1%

16%

2014/15

35

-2.7
14%

30

-8.4
54.2

25

43.1

12%
EBIT

20

Financial expense

Income tax

Net profit

10%

15

2015/16

+0.7

8%
10

-10.2
6%

5
0

52.9

43.5

4%
11/12

12/13*

13/14

14/15

15/16

EBIT

Financial expense

Income tax

Net profit
32* Restatement following IAS 19R application (pensions)3. Cash Flow Statement
In CHF millions

2014/15

2015/16

Profit before taxes

51.5

53.7

Adjustment for noncash items and taxes paid

3.7

-7.8

Cash flow from changes in net working capital

-5.0

-0.2

Cash flow from operating activities

50.2

45.6

Cash flow from investing activities

-9.7

-6.6

Free cash flow

40.5

39.0

Cash flow from financing activities

-45.1

-45.9

Change in cash and cash equivalents

-4.6

-6.9

Cash and cash equivalents at the end of the period

20.9

13.6
33

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting

Andreas Hürlimann

ATO

34

4. Market Factors and Strategy■ We firmly believe in our strategic
direction and the 4 drivers for ourbusiness remain unchanged■ We will continue to capitalize on
the drivers of LEM’s markets
through pure play components company
 diversification across geographiesand businesses35

4. Executing Strategy
Strategic priorities
Increase technology leadership■ Reinforce multidisciplinary innovation team■ Increase number of product launches■ Constantly improve performance of
products
Increase efficiency■ Reduce product cost through costcompetitive sourcing and manufacturing■ Reduce cost of marketing, administration
and R&D■ Reduce complexity of organization
Increase production flexibility■ Develop systems to better forecast
demand fluctuations■ Improve supply chain management

Achievements in 2015/16
■
■
■

■
■
■
■
■
■

Launched high number of new products
Co-developments with customers
New technologies ready for introduction

Increased production activities in Sofia
Increased use of Sofia and Beijing fornon-production activities
Across the board productivity increases
Completed ERP migration
Maintained high delivery performance
Added production capacity forsuccessful products36

4. New Leadership since 1 January 2016

François GabellaCEO-

Rainer Bos

Frank Rehfeld

General Manager
Automotive

General Manager
Industry

Sales & Marketing
Business development
R&D
Operations-

Sales & Marketing
Business development
R&D
Operations

Andrea Borla
CFO-

Finance
Legal
IT

37

4. Outlook■

For 2016/17 we expect■ Stable economic situation■ Steady sales in most markets■ Growth in China to continue, though at a slower pace
■ Growth drivers: green cars and renewable energies
businesses■

Unstable currency environment and price pressure to remainchallenging■

15% to 20% EBIT margin target range confirmed

38

Agenda1. LEM at a Glance

François Gabella

2. Highlights and Business Review

François Gabella

3. Financial Review

Andrea Borla

4. Strategy and Outlook

François Gabella

5. Proposals to Shareholders Meeting Andreas Hürlimann

ITL 1200-T

39

5. Dividend Proposal
40

■

40

40.1
37.9

38.2

35*

30
25

■

28.5

25.1

■
■

Dividend policy of distributing
significantly more than 50% ofconsolidated net profit toshareholders
Ordinary dividend of CHF 35 pershare proposed
Payment corresponds to apayout ratio of 91.7%
Sign of trust in the Company’s
future2011/12 2012/13 2013/14 2014/15 2015/16
Dividend

Earnings per share
40*

Proposal to ordinary General Meeting of the Shareholders of 30 June 2016

Q&A

41

Shareholder structure as at 31 March 2016

Other
32.3%
Werner O. Weber andUeli Wampfler**
46.3%

LEM Board andManagement*
0.2%
SarasinInvestmentfonds AG
3.8%
Montanaro AssetManagement
5.0%* Excludes shareholdings of Ueli Wampfler

Ruth Wertheimer / 7Industries Holding
12.4%** Opting out clause introduced in LEM’s articles
of incorporation by the shareholders' meeting on
25 June 201042

Financial Calendar and Contact Details
Financial calendar
The financial year runs from 1 April to 31 March

30 June 2016
5 July 2016
7 July 2016
11 August 2016
10 November 201616 February 2017
1 June 201722 June 201730 June 2017
4 July 2017

Ordinary General Meeting of Shareholders for the year 2015/16
Dividend ex-date
Dividend payment date
First quarter results 2016/17
Half-year results 2016/17
Third quarter results 2016/17
Year-end results 2016/17
Ordinary General Meeting of Shareholders for the year 2016/17
Dividend ex-date
Dividend payment date

For further information
Andrea Borla, CFO
Phone: +41 22 706 12 50
Email: investor@lem.com
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